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Why Synaptics Stock Tumbled Today

The CEO is out after weak demand from China led to a guidance cut.

What happened

Shares of Synaptics(NASDAQ:SYNA) slumped on Monday after the human interface solutions developer announced the sudden departure of its CEO after the market closed on Friday. The company also updated its guidance for the fiscal third quarter to reflect demand softness in China. The stock was down about 20.2% at 11:10 a.m. EDT.

So what

Synaptics waited until the market closed on March 15 to announce the departure of CEO Richard Bergman, effective immediately. The departure was not a result of disagreements between the executive and the company, according to Synaptics' press release.

Image source: Getty Images.

"We are focused on capturing numerous opportunities before us and evolving the company under new leadership to increase shareholder value," said Nelson Chan, who was named executive chairman of the board.

On top of the unexpected leadership change, Synaptics updated its guidance for the third quarter. The company now sees both revenue and non-GAAP (generally accepted accounting principles) earnings coming in around the lower end of its original guidance ranges. That would put revenue around $340 million, and non-GAAP earnings per share around $0.70. The company cited demand softness in China as one factor leading to the guidance cut.

Now what

Shares of Synaptics were downgraded by Mizuho Securities on Monday from buy to neutral to reflect the new information. Mizuho dropped its price target on the stock from $48 to $39, citing multiple challenges and possible market share losses across multiple product categories.

Synaptics is far from the only company dealing with weak demand from China, but the company's problems are apparently deep enough to warrant new leadership. Not surprisingly, that didn't sit well with the market.